Technological investment and accounting: A demand-side perspective on labor markets and enrollments

Since 2011, there has been a substantial decline in the number of students graduating from college with accounting majors. We help explain this decline by empirically showing that technological advancement is associated with lower relative demand from employers for accounting majors compared to other business majors, especially finance. Specifically, corporate software investment is associated with lower relative wages and employment for accounting majors. Cross-sectional tests point to these findings resulting from differences in demand for human capital associated with specific college majors. As the wage gap between finance and accounting majors widens, fewer students subsequently choose an accounting major and more choose a finance major, consistent with selection models going back to Roy (1951). Our findings illustrate the utility of incorporating human capital demand factors into analyses of accounting labor markets and their connection to college major choice.